Chennai-based Indian Bank, after being in the slow lane for quite some time, is shifting gears to catch up with biggies in the public sector banking industry. With a view to making up for the lost time, it has charted out plans and schemes to double its business in a five-year plan. In an exclusive interview with FE’s Sajan C Kumar, the bank’s MD & CEO Kishor Kharat talks about the road ahead. Excerpts:
Three quarters into the current fiscal, how well has the bank performed?
The bank has been growing at less than 5%, far below the industry, for the last 10-12 years. The industry has been growing at 11% to 12%, and growing below the industry really impacted the lender. Even worse, during the last three years, it had seen growth falling below 5%. The problem was that we were not exploiting the strong points of the bank. When I took over an year ago, we drawn up a 5-year plan for the bank, which envisaged doubling of business from Rs 3 lakh crore to 6 lakh crore, with a CAGR of 15% to 16%. By the end of the fifth year, we have fixed a target of achieving `5,000 crore net profit. We want our gross NPA to be below 3% and the net NPA less than 1%. The bank’s gross NPA was at 6.27% as on December 31, 2017, while the net NPA stood at 3.3%.
What is your assessment on the five-year plan? Has that started paying off?
In the five-year plan, the target for first year, which will be completed by March 2018, was pegged at `3.6 lakh crore. If you look at the Q3 results, you will find that we have already achieved a business of `3.59 lakh crore. It is very pertinent to note that during the last three quarters we have grown considerably on both advances and deposits fronts. During the three quarters of FY18, the advances had grown 7%, 14% and 22%, respectively. Similarly, the deposits, which were at less than 5% growth trajectory, had stabilised at 12.5% in the December quarter.
What were the operational changes you have brought in to infuse new lease of life into bank?
A sort of complacency was set in all the branches, especially among the field functionaries. What we did, when the five-year plan was approved, was to take steps to get the filed functionaries buy the management plan. We went to each zone, presented the new business strategy, and told the boys and girls that we need to move fast. We explained to them what is hurting us, and how bad it is to remain stagnant. Just look at the historical data. In 2015, Indian Bank, Bank of Baroda and Canara Bank had almost similar business. Today, all the banks barring us have `7 lakh crore or `8 lakh crore business but we are still struggling at `3 lakh-crore-plus business. We also told the staff that unless we grow, it would not help their career prospects. Our people understood that and started responding to the plan positively.
How did you manage the non-performing assets?
Because the bank was not taking big exposures, we could save from those sectors where all the other banks were struggling to survive. This has some historical reasons. Indian Bank actually got into NPA problem in 1995-96, much before the other PSU banks were caught into the sticky assets’ web. We actually came out of those situations and started to tread very cautiously, wishing not to encounter that situation again.
Afterwards, the cautious approach became over-cautious and eventually turned into complacency. Due to this approach, when other banks were having big exposures to the so called ‘stressed’ sectors, we were not having those kind of problems. The levels of advances were low and whatever restricted funds provided were recovered by the officials on a regular basis. We were not allowing the assets to slip into sticky ones. Also, quarter on quarter, we kept reducing the advances.
What were the focus areas for advances?
Our advances growth has been driven primarily by growth in RAM sector- retail, agriculture and MSMEs in the third quarter. While retail segment grew 26.97%, agriculture loans rose 21.48% and MSME book increased 38.35%.
As per the five-year plan, we have to achieve `4.24 lakh-crore business and for that we will be focusing more on MSMEs and agriculture verticals. In agriculture, we are tying up with external agencies to help procure products such as fertilisers. We will be deploying more resources like agricultural officers at our rural branches. In MSME, we have identified 73-74 special branches and centralised processing units would be setting up to support these branches. We have created activity-linked cluster schemes for MSMEs.
Any plans for capital raising?
The bank’s capital adequacy ratio as per Basel-III guidelines was at 12.44% as of December 31, 2017, against a regulatory requirement of 10.25%. Though we are adequately capitalised at the moment, there is a headroom to raise money. We have already received approval from our shareholders to raise `7,000 crore, mainly for the purpose of growth. Since the bank has drawn-up the five-year plan and would be needing further capital, it will take a call at an appropriate time.